As most of you know, what’s on your Credit Record is very important if you plan to apply for a loan or buy something on credit. Whenever you go for a loan/credit the proposed lender checks your credit record. Decisions about whether to lend to you or not will be taken in light of what’s on that file so it’s vital you keep that record as clean as possible and check it at least annually.
What’s held on file is due to change in March, so take great care of how you manage your loans and bill payments if you do want credit in the future.
You can log onto www.mycreditfile.com.au and obtain a free copy (takes a few weeks to mail to you) or an immediate copy is available on line for about $70. You can also set up an email alert which will inform you each time someone accesses your file.
To date that credit record contains enquiries from lenders wanting to check if your record is clean, any defaults (paid and unpaid) you have and any judgments made against you (e.g. bankruptcy)
How long do they show for?
- defaults, judgments and enquiries – 5 years
- clearouts – 7 years
- court writs and summons – 4 years
- external administrations and directorships – 10 years
Changes from 14 March 2014
Major changes to the credit reporting laws, means that the number of people on credit blacklists is set to rise. Those who struggle to pay their bills on time will find it harder to obtain finance after changes to credit reporting took effect from March 2014.
New laws from November 2012 have been introduced that allow additional account and payment history information (RHI) to be recorded on your personal credit report as from March 14th.
Currently the system only shows payments more than 60 days late are recorded, however, under the new proposed reporting regime, a payment more than five days will be recorded as ‘not made’. Your finance application can be declined on this basis particularly if you are in Mortgage Insurance territory (above 80% LVR).
Payments more than 60 days late will continue to be flagged as a ‘default’.
Information about whether you have met your consumer credit obligations, or made a payment on time or missed a payment (if only part payment is made, this is considered a miss-payment) will show on reports should the credit provider choose to do so.
You will need to be much more careful to make payments on time.
There is some good news! Default listings on your credit record have, to date, hung around for 5 years even if fully paid. They have been responsible for many declines to loan applications. From 14 March onwards, if you have paid the default fully it will disappear from your file. However, take care. Taking the listed default off a file is the responsibility of the credit provider who initially listed it. They may forget to do so. Check your credit record regularly and if it still contains a default that is paid you will need to chase up that company and request the default be removed.
Any defaults $100 or less will be automatically deleted after a 12-month period.
You may also place a ‘Ban Period’ on your file. If you suspect that your identity has been stolen or compromised in some fraudulent way you can request a Ban on anyone (including a lender) from obtaining your credit record for a period of time. This strategy is aimed at reducing identity theft.
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.
Jenna Ford, Chan & Naylor